Apple Set to Beat Expectations in Q3 Earnings, Goldman Sachs Predicts
Apple Inc. AAPL is poised to exceed analyst expectations when it releases its third-quarter earnings report after Thursday’s closing bell, according to Goldman Sachs. The investment firm is optimistic about Apple’s performance, citing strong demand for new iPad models and the company’s increasing focus on services.
Key Takeaways:
- Goldman Sachs forecasts Apple to report earnings per share (EPS) of $1.36, beating the Wall Street consensus of $1.33.
- The firm also expects revenue to reach $85.1 billion, a 4% increase from the previous year.
- Apple’s recent iPad launches are expected to drive market share gains despite lagging performance in recent quarters.
- Goldman Sachs maintains a Buy rating on Apple, highlighting the company’s robust growth in services and product innovation.
- Apple’s exposure to downside risks includes weakening consumer demand, supply chain disruptions, and growing competition.
Apple’s Services-Led Growth Story
Goldman Sachs analysts are particularly bullish on Apple’s services segment, anticipating a significant contribution to the company’s overall growth in the coming years. This optimism stems from the belief that Apple’s vast installed base translates into immense potential for recurring revenue through the expansion of its services ecosystem.
“The majority of gross profit growth over the next five years should be driven by services, which should mark an inflection point in the services investment narrative,” wrote Michael Ng, a Goldman Sachs analyst. "The durability of Apple’s installed base and the resulting revenue growth visibility from attaching more services and products is what underpins the recurring revenue — or Apple-as-a-Service — opportunity.”
Balancing Growth with Risks
While Goldman Sachs sees a bright future for Apple, they acknowledge potential risks that could affect the company’s performance. These include:
- Weakening consumer demand: Economic uncertainties could lead to decreased consumer spending on Apple’s products and services.
- Supply chain disruptions: Ongoing supply chain challenges could hinder Apple’s ability to manufacture and deliver its products.
- Growing competition: Apple faces increasing competition in key markets, particularly in areas like video streaming, where other players are investing significantly.
While Apple remains a dominant player in the tech sector, its position is not unassailable. Analysts believe that the company’s continued success hinges on its ability to innovate and navigate these challenges effectively.
Apple’s Share Price & Related ETFs
Apple’s stock price fell slightly on Tuesday, closing at $217.54, but this downward trend also impacted related ETFs:
- T-Rex 2X Long Apple Daily Target ETF AAPX fell by 1.51%.
- Direxion Daily AAPL Bull 2X Shares AAPU dropped by 1.94%.
- Fidelity MSCI Information Technology Index ETF FTEC declined by 1.51%.
- Vanguard Information Technology ETF VGT shed 2.59%.
- IShares U.S. Technology ETF IYW lost 2.62%.
Looking Ahead
Apple’s earnings report on Thursday will be a key indicator of the company’s performance and its ability to navigate current market challenges. Analysts and investors will be closely watching to see if Apple can deliver on Goldman Sachs’ predictions and continue its impressive growth trajectory. The report could potentially have a significant impact on Apple’s stock price and the broader tech sector.
